Washington Federal v. Hulsey, 162 Idaho 742

Background

Michael Hulsey (individually) borrowed from Washington Federal to buy nine commercial condominium units; title was later transferred to SM Commercial Properties, LLC (his wholly owned LLC) while Hulsey remained personally liable on the loan.
Parties stipulated to a Judgment and Decree of Foreclosure for $1,487,517.62 and to retain jurisdiction to determine any deficiency after sale.
SM Commercial Properties filed Chapter 11 on the eve of a scheduled sheriff’s sale; Washington Federal obtained relief from the automatic stay in bankruptcy and the sheriff’s sale proceeded.
Washington Federal purchased the property at the sheriff’s sale by credit bid (~$765,000) and later sought a deficiency against Hulsey.
At the deficiency trial the district court found Washington Federal failed to prove fair market value or a deficiency; it also denied post-judgment attorney’s fees and costs for both parties.
Idaho Supreme Court affirmed dismissal of the deficiency claim, vacated the denial of Washington Federal’s request for attorney’s fees and costs (as erroneous under controlling contract precedent), and remanded for further proceedings on fees; other fee-related issues were rendered moot or partially awarded on appeal fees.

Issues

Issue	Plaintiff's Argument (Washington Fed.)	Defendant's Argument (Hulsey)	Held
1. Issue preclusion from bankruptcy ruling on lift-stay hearing	Bankruptcy court effectively determined value (no equity), so Hulsey should be precluded from contesting fair market value	Bankruptcy court only found value was likely less than debt to decide stay; it did not determine fair market value or deficiency	Not precluded: bankruptcy court did not actually decide fair market value or deficiency; collateral estoppel inapplicable
2. Proof of deficiency and fair market value at time of sale	Bank’s licensed appraiser established FMV (~$780,000); that evidence should satisfy burden	Appraiser’s assumptions were discredited; offers and other evidence undermined appraiser’s credibility; bank bears burden	Affirmed: district court reasonably concluded bank failed to meet its burden; no deficiency proven
3. Denial of post-judgment attorney’s fees and costs (below)	Contract and deed of trust authorize fees regardless of prevailing-party finding; district court erred to deny fees	District court denied fees as neither side prevailed overall; Hulsey argued fees were not preserved or were waived by stipulation	Reversed/Remanded on fees: district court abused discretion by not applying contract precedent (Post, Farm Credit); vacated denial and remanded for further proceedings on fees (some statutory theories not preserved)
4. Fees on appeal / costs for responding to cross-appeal	N/A (did not request fees for appeal)	Hulsey sought fees for prevailing on cross-appeal	Hulsey not entitled to fees on appeal; Washington Federal awarded fees for responding to Hulsey’s dismissed cross-appeal

Key Cases Cited

Sims v. Daker, 154 Idaho 975, 303 P.3d 1231 (standard for appellate review of trial findings)
Steuerer v. Richards, 155 Idaho 280, 311 P.3d 292 (appellate scope to draw independent legal conclusions)
Kennedy v. Schneider, 151 Idaho 440, 259 P.3d 586 (clearly erroneous standard for findings)
Ticor Title v. Stanion, 144 Idaho 119, 157 P.3d 613 (elements for issue preclusion)
Kootenai Elec. Coop., Inc. v. Lamar Corp., 148 Idaho 116, 219 P.3d 440 (discussion of issue-preclusion principles)
Jarvis v. Rexburg Nursing Ctr., 136 Idaho 579, 38 P.3d 617 (substantial and competent evidence standard)
Northwestern Farm Credit Servs., FLCA v. Lake Cascade Airpark, LLC, 156 Idaho 758, 331 P.3d 500 (deficiency-judgment principles)
MDS Invs., L.L.C. v. State, 138 Idaho 456, 65 P.3d 197 (must assert specific legal basis when claiming attorney fees)
Bream v. Benscoter, 139 Idaho 364, 79 P.3d 723 (procedural requirement for fee requests)
Post v. Murphy, 125 Idaho 473, 873 P.2d 118 (contractual fee clause can obligate non-prevailing party to pay fees)
Farm Credit Bank v. Wissel, 122 Idaho 565, 836 P.2d 511 (contractual entitlement to fees despite non-prevailing status)
Telford v. Smith County, Texas, 155 Idaho 497, 314 P.3d 179 (standards for appellate fee awards)